Nov. 21 (Bloomberg) -- Petroliam Nasional Bhd., which is
seeking approval of a $5.2 billion takeover of Progress Energy
Resources Corp., has proposed a public offering of shares in the
natural gas producer within five years as a concession to
Canada’s government, a person with knowledge of the matter said.

Malaysia’s state oil and gas company, known as Petronas,
offered to sell Progress Energy shares three to five years after
completing the buyout, the person said, asking not to be
identified as the information is private. The move may also
address shareholders concerns over Progress Energy’s future, the
person said.

Making Progress Energy shares available to Canadian
investors would also give the country regulatory oversight over
the company. Christian Paradis, Canada’s industry minister,
rejected the acquisition last month under the nation’s foreign-takeover law on grounds that it wasn’t deemed to be to the
country’s “net benefit.”

Buying Progress Energy would give the Malaysian company
ownership of the largest holder in the Montney shale-gas area of
British Columbia and full control of the three Progress Energy
fields Petronas bought a stake in last year.

The rejection raised questions about the openness of
Canadian Prime Minister Stephen Harper’s government to foreign
investment. It’s also cast doubt on whether Beijing-based Cnooc
Ltd.’s $15.1-billion takeover of Calgary-based oil company Nexen
Inc. will be approved under its foreign takeover law.

Rejection Appeal

Cnooc, China’s biggest offshore oil and gas producer, has
accepted management and employment conditions set by the
Canadian government as it seeks approval for its Nexen takeover,
two people familiar with the matter said yesterday. Commercial
issues are still being negotiated such as the extent of capital
spending plans and other matters related to Cnooc’s status as a
state-owned enterprise, said one of the people on condition they
not be identified because negotiations are confidential.

Petronas, which agreed to buy Progress Energy for C$5.2
billion ($5.2 billion) in June, was allowed to appeal its
rejection and has since been making representations to the
government. The two companies further extended a deadline for
the acquisition to Dec. 30 while submitting further undertakings
to the industry minister, according to a joint statement
yesterday.

Petronas wants to convince Canadian authorities of its
operational independence from the Malaysian government, the
Financial Times reported Nov. 12, citing Chief Executive Officer
Shamsul Azhar Abbas. It has offered to appoint independent
directors to Progress Energy’s board, according to the report.

The Petronas decision was the second time in two years
Harper’s administration has denied a multi-billion dollar
overseas bid. The government blocked BHP Billiton Ltd.’s $40
billion hostile offer for Potash Corp. of Saskatchewan Inc. in
2010 after the province’s premier, Brad Wall, opposed it.